Op-ed: How do Ukraine, Moldova and Georgia capitalize on the digitization of their economies?

In this article I want to address the status of digital economy in Moldova, Ukraine and Georgia. Before delving into the topic, however, it is worth pointing out that by digital economy I refer not only to the IT industry, which serves as a “forge of human resources”, but also the platforms on which advanced technologies and software are created. It also encompasses the use of digital solutions in traditional business and public administration. It's not just about developing technologies, it's also about putting them to good use.

Ukraine and its supremacy in the field of digital solutions

Ukraine occupies a leading position in the IT sector. Over 300 thousand IT specialists work in Ukraine, a country that develops advanced products not only for national IT companies, but also for the banking sector and other industries. Currently, this sector of the economy generates a net income of over 7 billion USD per year. In addition, seven unicorn companies have emerged in Ukraine, with a total estimated value exceeding 1 billion USD. They currently operate on different markets.

The country's digital economy is developing rapidly, at times even faster than in certain Western countries. For instance, paper checks are still used in the USA, while in Ukraine, Moldova and Georgia, such obsolete financial instruments were never employed. The development of the digital economy in these countries coincided with the collapse of the USSR, where most of these tools were not available to the population. This enabled these countries to swiftly implement new digital solutions.

A lot of Ukrainian specialists work in global markets, creating products for foreign customers. Thus, the country's economy is rapidly reducing its reliance on natural resources and heavy industry, a mainstay of the post-Soviet period. The IT industry is inherently transparent, accountable and corruption-free – something that cannot be said of other industries in the region.

Moldova and Georgia – an accelerated growth of the IT industry

A similar dynamic can be noticed in the Republic of Moldova, although at a smaller scale. One of the country's problems is the brain drain, as young people with Romanian citizenship prefer to seek employment in Europe. The fast-paced development of the IT sector creates unique opportunities for Moldova. Despite its small size and lack of access to the sea, Moldova has successfully become part of the global economy, developing digital products for large international enterprises. In addition, the country is creating regional digital products that compete with global counterparts. For instance, local taxi apps compete successfully with giants like Uber or Bolt.

As for Georgia, it was only a few years ago that its IT sector started to develop. The country was not seen as an exporter of digital services until 2020, when StrategEast, together with the international company EPAM Systems, launched a program designed to train and hire homegrown experts. This led to sweeping reforms and the introduction of a special tax regime applied to IT companies, increasing the country’s appeal to international IT companies. In just three years, the number of foreign companies operating in Georgia increased to 124, and exports of digital services approached $1 billion. This helped not only strengthen the economy, but also transform Georgia into one of the major exporters of technological solutions.

Along with Ukraine and Moldova, Georgia is a good example of how successful digital solutions lead to regional economic growth and the consolidation of positions on the global market. These three countries are emerging as important players in the digital economy, especially in the context of rapid global digitization.

East-West development gaps – myth or fact?

In terms of interaction with the West, Western countries provide the main markets for digital services developed by Ukraine, Moldova and Georgia. Most of their clients are Western companies. And yet, if we were to compare the level of digitization, in some respects these countries are even more advanced than the West. For example, transferring funds from one card to another takes only a few seconds in these countries, while in some Western countries it can take up to several days, due to a more conservative approach. In certain regards, such as Internet speed and broadband coverage, the digital infrastructure of these countries often outperforms certain Western countries.

However, digitization is not always synonymous with reliability. The West can help us by implementing tested and sustainable solutions, as well as by helping increase the digital literacy of the population. In truth, despite the high rate of development of the IT industry in Ukraine, a significant part of the population is still not engaged in the digital economy, due to poverty and inadequate access to educational resources. Western assistance in creating equal opportunities could be a major step towards sustainable development.

At the same time, these countries fare much better in terms of the implementation of digitization in the administration. It’s worth noting the willingness of Georgia, Moldova and Ukraine to experiment, and their flexibility in decision-making. Within the bureaucratic Western systems, it can be difficult to implement new solutions, while in our region there are already platforms for testing the latest approaches. This is our unique advantage, which is why we encourage active cooperation with our region and the transfer of know-how.

In addition, Ukraine, Moldova and Georgia have a high level of engineering expertise, on a par with the West. Western companies already accept many solutions from this region as reliable and effective. This proves that we are able to offer solutions that have already proven their effectiveness in real conditions, although they have not yet been used in the West due to a certain degree of reluctance.

What can the West learn from the digital expertise of these countries?

To answer the question, I will address a number of issues.

Ukraine, Moldova and Georgia have successfully introduced large-scale digital public services. For example, the Ukrainian app “Diia” allows citizens to access over 50 public services on their smartphones. Western countries could adopt similar user-friendly platforms to optimize their public services as well.

Additionally, due to Russia’s constant threats, these countries have become experts in cyber defense and resilience. They also foster a strong entrepreneurial culture despite their limited resources. This paves the way for the emergence of a dynamic ecosystem of startups.

At the same time, these countries have showcased the value of close cooperation between governments and technology sectors, especially when it comes to developing a digital economy with limited budgets. Western countries can learn from successful examples of public-private partnerships, and this will boost their digital innovation capabilities.